Econ 202 – Macro Economics
LAU - Spring 2023
Jamal Ibrahim Haidar
Name of Student:
ID of Student:
Assignment # 3 -- Due date: February 10 in class
This assignment is an exercise to test your ability to answer EASY questions related to material
covered in course so far. It should not take you more than 25 minutes to answer ALL questions if
you have already mastered the material. It should allow you to test your knowledge of few key
concepts and ability to exercise reflective thinking. For your own learning interest, try to answer
the questions after studying the required texts, as mentioned in the syllabus, and without openbook, slides, or notes. Answer each of the below questions.
1. Which of the following is primarily a macroeconomic topic?
A) monetary policy.
B) fiscal policy.
C) the growth rate of GDP.
D) inflation.
E) all of the above.
2. Which of the following are central themes of macroeconomics?
A) The short-term fluctuations in output, employment, financial conditions, and prices.
B) The longer-term trends in output and living standards.
C) Studies in individual prices, quantities, and markets.
D) Both A and B.
E) none of the above.
3. Gross Domestic Product (GDP) is:
A) the measure of the market value of only part of the goods and services produced in a
country during a year.
B) the measure of the market value of all final goods and services produced in a country
during a year.
C) the measure of the market value of all goods and services produced in a country
during a month.
D) not useful, so economist do not use it.
E) none of the above.
4. The goals of macroeconomic policy include:
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Econ 202 – Macro Economics
LAU - Spring 2023
Jamal Ibrahim Haidar
A) high employment.
B) low unemployment.
C) stable prices.
D) growing real GDP.
E) all of the above.
5. Which of the following items is NOT part of fiscal policy?
A) Government purchases of goods and services.
B) Transfer payments.
C) The money supply.
D) Taxes.
E) Government borrowing by selling bonds.
6. Which of the following most accurately describes a recession?
A) a period of significant decline in total output, income, and employment, usually
lasing more than a few months and marked by widespread contractions in many
sectors of the economy.
B) a period of slight decline in employment, usually lasing only a few months.
C) a period of significant decline in total output, income, and employment, usually
lasing more than a few years and marked by widespread contractions in many sectors
of the economy.
D) a period of decline in total output, usually lasing more than a few months and marked
by contractions in one or two sectors of the economy.
E) none of the above.
7. Personal income taxes are examples of:
A) fiscal-policy instruments.
B) monetary-policy instruments.
C) trade-policy instruments.
D) incomes policy instruments.
E) all of the above.
8. The aggregate demand curve is downward-sloping because:
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Econ 202 – Macro Economics
LAU - Spring 2023
Jamal Ibrahim Haidar
A) higher prices make businesses more profitable and thus output expands.
B) lower prices makes business conditions more attractive so that quantities expand.
C) lower prices make some people feel wealthier and they therefore demand more.
D) lower prices cause substitutions that increase the quantity demanded.
E) none of the above.
9. An increase in government spending that increases aggregate demand should, in the short
run, cause:
A) prices to fall and output to remain fixed.
B) prices to climb and output to remain fixed.
C) prices to climb and output to fall.
D) prices to fall and output to climb.
E) none of the above.
10. The ups and downs of real GDP are called:
A) statistical errors.
B) accounting errors.
C) business cycles.
D) the Phillips curve.
E) consumption wave patterns.
Use the following to answer questions 11-12:
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Econ 202 – Macro Economics
LAU - Spring 2023
Jamal Ibrahim Haidar
Figure-1
AS |
AS |
AS
Price
Price
AS
AD=AD|
AD=AD|
Quantity
(a)
Quantity
(b)
Price
Price
AS=AS |
AD|
AD
AD|
AD
Quantity
(c)
Quantity
(d)
11. Which panel in Figure-1 most accurately reflects the effect of large increase in interest
rates?
A) a.
B) b.
C) c.
D) d.
E) none of the above.
12. Which panel in Figure-1 most accurately reflects the short-run effect of an increase in
efficiency?
A) a.
B) b.
C) c.
D) d
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Econ 202 – Macro Economics
LAU - Spring 2023
Jamal Ibrahim Haidar
E) none of the above.
13. Which of the following is a tool of fiscal policy?
A) Wage and price controls.
B) Government expenditures.
C) Control of the money supply.
D) Control of the exchange rate.
E) All of the above.
14. Potential GDP is:
A) the total value of goods and services measured at current prices.
B) the total value of goods and services that could be produced at full employment.
C) the total value of goods and services measured at prices corrected for inflation.
D) the total value of goods and services net of government borrowing.
E) none of the above.
15. Aggregate supply refers to:
A) the total quantity of goods and services that the nation’s businesses willingly produce
and sell in a given period of time.
B) the partial quantity of goods and services that the nation’s businesses willingly
produce and sell in a given period of time.
C) the total quantity of goods and services that the nation’s government willingly
produce and sell in a given period of time.
D) the total quantity of goods and services that the nation’s businesses hope to produce
and sell in a given period of time.
E) none of the above.
16. Positive price inflation necessarily means that:
A) all prices are increasing at the same time.
B) prices are climbing but wages are not.
C) though some prices may be falling, prices are, on the average, climbing.
D) the associated rate of unemployment is rising.
E) none of the above.
Use the following to answer questions 17-20:
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Econ 202 – Macro Economics
LAU - Spring 2023
Jamal Ibrahim Haidar
Figure-2
17. Which panel in Figure-2 most accurately reflects the short-run effect of an increase in
personal income taxes?
A) a.
B) b.
C) c.
D) d
E) None of the panels.
18. Which panel in Figure-2 most accurately reflects the short-run effect of the imposition of
an environmental control that increases the cost of production?
A) a.
B) b.
C) c.
D) d
E) None of the panels.
19. Which panel in Figure-2 most accurately illustrates a period of high prices and low
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Econ 202 – Macro Economics
LAU - Spring 2023
Jamal Ibrahim Haidar
output?
A) a.
B) b.
C) c.
D) d.
E) none of the panels.
20. Assuming that the new curve in each panel in Figure-2 is the one labeled with an
apostrophe or prime symbol ('), and that each panel begins in the same position, which
panel would be the "best" one for an economy?
A) a.
B) b.
C) c.
D) d.
E) Cannot be determined.
21. The most common measure of the price level in the U.S. economy is:
A) the Dow Jones Industrial Average.
B) the Consumer Price Index.
C) the Laspeyres Index.
D) an incomes policy.
E) none of the above.
22. Real GDP is:
A) the total value of goods and services net of imports.
B) the total value of goods and services deflated by an index of current prices to
correct for inflation.
C) the total value of goods and services that could be produced at low (full)
employment.
D) the total value of goods and services corrected so that it is measured in terms of
current prices.
E) none of the above.
23. With an upward sloping aggregate supply curve in the short run, an increase in aggregate
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Econ 202 – Macro Economics
LAU - Spring 2023
Jamal Ibrahim Haidar
demand can be expected to cause:
A) the price level to climb.
B) the price level to fall.
C) output to climb.
D) the price level and output to climb.
E) the price level to All even as output climbs.
24. Which of the following is likely to happen during wartime?
A) An increase in aggregate demand.
B) An increase in net exports.
C) An increase in aggregate supply.
D) An increase in prices.
E) A and D are correct.
25. The interaction of aggregate supply and demand help determine all of the following
except:
A) Output.
B) Employment.
C) Prices.
D) Exports.
E) None of the above.
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